What is Rate contract?
A rate contract is an agreement fixing the rates and terms for goods or services over a period, with orders placed as needed instead of a fixed quantity.
What is a rate contract?
A rate contract is an agreement between a buyer and one or more suppliers to supply items at fixed rates and terms for a set period. It is a standing offer, not an order: the buyer, or other offices allowed to use it, places supply orders against it as needs arise.
Rate contracts are used for items bought regularly in varying quantities, such as stationery, consumables, spares or common services. A quantity may be indicated, but it is usually only an estimate.
How it works
The terms depend on the tender and the buyer’s procurement manual.
- The buyer tenders for rates, not for one fixed purchase
- Contracts may go to L1 alone or, where the tender allows, to several suppliers at the L1 rate
- Supply orders are issued against the rate contract during its validity
- Many rate contracts include a price fall clause, so the supplier cannot sell the same item to others at a lower price without passing it on
- Security deposit or performance security may be asked for
Tips for bidders
Price for the whole contract period. You are bound by your rate for every order placed during validity, even if your costs rise, unless the contract has a price variation clause.
Do not plan capacity around the indicated quantity. The buyer is usually not bound to order any minimum, so read the clause on quantities carefully.
Common questions
Common questions about Rate contract in government tenders.
No. A rate contract fixes rates and terms. Separate supply or purchase orders are placed against it when the buyer needs the items.
Usually not. Most rate contracts state that quantities are indicative, but check the tender for any minimum commitment.
It is when the buyer concludes rate contracts with more than one supplier for the same item, usually at the L1 rate, to secure enough supply.
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